TMI Blog2018 (6) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... to use spectrum, but for the actual use of it on regular basis. It is in the nature of a revenue expenditure eligible for deduction. It cannot be construed as a capital expenditure and thus goes out of the ken of section 35ABB. As relying case of the assessee’s sister concern, namely, Vodafone Mobile Services Ltd as relying on COMMISSIONER OF INCOME-TAX VERSUS FASCEL LTD. [2008 (12) TMI 743 - DELHI HIGH COURT] we uphold the impugned order in deleting the disallowance. - decided in favour of assessee Addition on account of Advertisement expenses - nature of expenditure - Held that:- This issue is no more res integra in view of the judgment of the Hon’ble Delhi High Court in CIT vs. Citi Financial Consumer Finance Ltd. [2011 (3) TMI 622 - DELHI HIGH COURT] in which advertisement expenditure has been treated as revenue. Deduction towards frauds committed by its customers - allowable expenditure u/s 37(1) - Held that:- Deduction towards frauds is not on account of embezzlement by employees, but, for the loss incurred due to frauds committed by the assessee’s customers who did not make payments for the bills raised on them by the assessee. This loss, being incidental to carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 5.10 crore has been rightly made. This ground is not allowed. Disallowance of interest on capital work-in-progress - assessee has a common pool of funds - assessee argued that investment in CWIP was made out of own interest free funds - Held that:- Even though the shareholders’ fund is more than the investment in CWIP, but no detail of secured loan is available. In the absence of such specific information, it is difficult to decide the issue at our end. The impugned order is set aside to this extent and the AO is directed to decide this issue afresh in consonance with our foregoing observations. It is made clear that if there is some direct borrowing for investing in CWIP, then interest paid on such borrowing has to be disallowed. If, on the other hand, there is no specific borrowing, the financing of CWIP has to be treated as out of interest-free shareholders’ fund. In such a scenario, no disallowance of interest can be made as the interest-free shareholders’ fund would be higher than the amount of investment in CWIP. TDS u/s 194J - addition u/s 40(a)(ia on account of 'Roaming charges’ - why such payment be not considered as ‘fees for technical services’ unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Indian Telegraphs Act. Rather, such penalties were imposed for non-compliance with the contractual obligations under the Licence agreement. As the payment by the assessee is not for an offence, nor is it prohibited by law, the same being failure to comply with the contractual obligations, cannot fall within the domain of Explanation 1 to section 37(1) of the Act.Addition deleted Disallowance of deduction u/s 80IA on certain items of income - Held that:- To the extent the FDRs were obtained to serve as a margin money for availing credit facilities from the bank, we find that the link of such interest income with the eligible business stands established and the resultant interest income assumes the character of `Business income’. Income earned from such FDRs qualifies for deduction u/s 80-IA of the Act. Since details of interest income of ₹ 3.70 crore are not available on record, we set aside the impugned order on this score and remit the matter to the file of the AO with a direction to allow deduction u/s 80IA. The remaining amount of interest income having no link with the business of telecommunications, which is simply on parking of surplus funds in FDRs, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] the TPO was required to simply determine the ALP of the international transaction, unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1) of the Act. As the TPO in the instant case initially determined Nil ALP by holding that no benefit accrued to the assessee etc. and the AO made the addition without examining the applicability of section 37(1) of the Act, we find the actions of the AO/TPO running in contradiction with the ratio laid down in Cushman & Wakefield (supra) - send the matter to the file of AO/TPO for deciding it in conformity with the above discussion Transfer pricing adjustment of Advertising, Marketing and Promotion (AMP) expenses - Held that:- There is not even a single order in which the selling expenses have been directed to be included in the overall AMP expenses. Simply because the Department has not accepted the judgments of the Hon'ble jurisdictional High Court and SLPs have been admitted, the binding nature of such judgments is not mitigated in any manner. Unless the Hon'ble Supreme Court reverses the judgment of a High Court, the same holds the field and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Panel (DRP) against the addition in the draft order. The DRP got convinced with the assessee s contention and, relying on the order passed for the A.Ys. 2000-01 to 2008-09 deleting similar disallowance in the case of Vodafone Mobile Services Ltd., a sister concern of the assessee, deleted the addition. The Revenue is aggrieved against the deletion. 5. We have heard both the sides and perused the relevant material on record. It is observed that the assessee paid commission of ₹ 142.32 crore to the agents in the post-paid segment of its business. The assessee furnished necessary details and also Form no.16As in respect of major payments. Despite this, the AO chose to make an ad hoc disallowance of 10% of the total commission payment. It is observed that the ld. DRP deleted the addition by relying on the order passed for the A.Ys. 2000-01 to 2008-09 in the case of sister concern of the assessee. The Revenue assailed the said order passed by the first appellate authority before the Tribunal. In DCIT vs. Vodafone Mobile Services Ltd. (2016) 176 TTJ 430 (Del), the Tribunal has upheld the deletion of addition. Relevant discussion has been made and the conclusion drawn by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectrum charges paid to Government of India as a percentage of revenue on regular basis. This payment is not meant for obtaining a licence to use spectrum, but for the actual use of it on regular basis. It is in the nature of a revenue expenditure eligible for deduction. Thus, it cannot be construed as a capital expenditure and thus goes out of the ken of section 35ABB. It is further noticed that similar issue was argued before the Tribunal in the aforesaid case of the assessee s sister concern, namely, Vodafone Mobile Services Ltd. After considering the relevant details, the Tribunal in para 14 of its order directed to delete the addition by relying on judgment of the Hon ble jurisdictional High Court in the case of CIT vs. FASCEL Ltd. 17 DTR 306 (2009). Since the facts and circumstances of the instant ground are mutatis mutandis similar to those considered and decided by the Tribunal in the case of Vodafone Mobile Services Ltd. (supra), respectfully following the precedent, we uphold the impugned order in deleting the disallowance. This ground fails. 9. Ground no. 3 of the Revenue s appeal is against the deletion of addition of ₹ 2,52,28,036/- on account of Advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to why the sum of ₹ 205.38 crore should not be treated as capital expenditure and, hence, amortized u/s 35ABB, the assessee submitted that as per the terms of the Licence agreement with the Department of Telecommunications and National Telecom Policy, 1999, the licence fee agreed with and paid up to the date of migration was treated as one time entry fee which was capitalised to be amortized u/s 35ABB. As regards the deduction of ₹ 205.38 crore claimed during the year, the assessee submitted that it was a licence fee at specified percentage of the gross revenue derived by the assessee from its cellular business. It was reiterated that the recurring licence fee was not for acquiring any telecommunication licence, but, for maintenance of licence to be paid to the Government of India in terms of the new Telecom Policy. The AO observed that the assessee paid such an amount to the Government of India, Department of Telecommunications in consideration of grant of licence to operate and provide the telecommunication services and the object was acquisition of licence. He observed that as against the amount of licence fee debited in the P L Account on accrual basis to the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date. Part III of the Agreement contains financial condition. Clause 18.1 provides that: no additional entry fee shall be charged from CMSPs for migration to new policy. Clause 18.2 provides that the licensee shall pay licence fee annually @ 8% of adjusted gross revenue (AGR) excluding spectrum charges and for the first four years w.e.f. 01.04.2004, annual licence fee payable shall be 6% of AGR. Clause 18.3 of the Agreement provides that spectrum charges shall be 2% of the AGR. While dealing supra with ground no. 2 of the Revenue s appeal, we have dealt with spectrum charges, which amount was paid by the assessee during the year to the tune of ₹ 117.47 crore. However, in the instant ground, we are concerned with a sum of ₹ 205.38 crore, being, the amount debited by the assessee in its Profit Loss Account on accrual basis. The amount of ₹ 205.38 crore is different from the spectrum charges paid by the assessee to the tune of ₹ 117.47 crore. We have noticed from financial conditions of the new licence Agreement which provides that there shall be no additional entry fee from CMSPs. However, the licensees have been required to pay the licence fee annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pertaining to the year under consideration is being separately allowed. The AO will verify the calculations in this regard and ensure that no double deduction is allowed in the current or earlier or later years in this regard. This ground is allowed. 16. Ground no. 2 of the assesssee s appeal is against the disallowance of depreciation amounting to ₹ 510,79,752/- claimed on fixed assets on account of Asset restoration cost (ARC) obligation. Succinctly, the facts of this ground are that the assessee capitalised certain sums on account of ARC obligation, being, the estimated cost to be incurred at the leased and shared network sites and office premises for restoring them to their original condition at the end of the lease period. Depreciation amounting to ₹ 5.10 crore was claimed on the said amount capitalised. The AO did not allow such depreciation on the ground that the amount allocated was not in the nature of an ascertained liability. The assessee s contention that it had entered into lease agreement with various owners for its office space and for setting up of cell site towers and such lease agreements put the assessee company under obligation to restore the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et out in clause 10, which is the bedrock of the assessee s claim for asset restoration cost obligation and resultant depreciation. The relevant part of this clause provides that the assessee: shall at its own cost restore the premises of the said building to its original state, if any damage is caused in the course of the removal of cables, antennas or other equipments. There is absolutely no doubt on the interpretation of clause 10 of the agreement that the assessee will be obliged to incur cost at the time of determination of the agreement only if damage is caused in the course of removal of cables, antennas or other equipments and not otherwise. Damage to the premises, if any, arising on the removal of cables, antennas and other equipments, etc., can be ascertained only at the time of termination of the agreement and not at the time of entering into the agreement. Further, no obligation will be incurred if no loss is caused to the premises at the time of removal of cables etc. As such, we are of the considered opinion that the addition of ₹ 5.10 crore has been rightly made. This ground is not allowed. 19. Ground no. 3 of the assessee s appeal is against the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of assets, which have still not been used by the assessee during the year for its business purpose. The AO invoked first proviso to section 36(1)(iii) which, at the material time, read as under:- `Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. 22. At this stage, it is relevant to mention that the words for extension of existing business or profession have been omitted by the Finance Act, 2015 w.e.f. 01.04.2016. As we are dealing with the A.Y. 2009-10, such words are relevant for our purpose. A careful perusal of the section 36(1)(iii) in juxtaposition to the first proviso indicates that the amount of interest paid in respect of capital borrowed for the purposes of business or profession is deductible, but, any amount of interest paid in respect of capital borrowed for `acquisition of an asset for extension of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the assessee s Director s Report for the year under consideration which records that: the company has also witnessed a good level of increase in the subscriber base in all the three Circles (UPE, Rajasthan and Haryana) in which it operates. The company has further expanded its network to increase its coverage across all its Circles. During the year, the company added 5096 cell sites to enhance its network coverage closing with 14411 cell sites as at 31st March, 2009. It is evident from the assessee s Director s Report that the setting up of new cell sites has enhanced its network coverage within all the three existing Circles and the resultant customer base, which is nothing, but, an extension of existing business. We, therefore, hold that the argument advanced by the ld. AR that the setting up of new cell sites, the cost of which was capitalised in the balance sheet as Capital work in progress (CWIP), does not lead to extension of existing business, is sans merit and, hence, dismissed. 26. The ld. AR then argued that investment in CWIP was made out of own interest free funds and hence no interest can be attributed to any capital borrowed for the purpose of making such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from operations of the company was ₹ 418.04 crore and the assessee had also raised capital of ₹ 7.90 crore, apart from receiving interest free deposit of ₹ 10.03 crore. The assessee submitted before the first appellate authority that the balance-sheet of the assessee adequately depicted that there were enough interest free funds at its disposal for making investment. The ld. CIT(A) got convinced with the assessee s submissions and deleted the addition. Before the Tribunal, it was contended on behalf of the Revenue that the shareholders fund was utilized for the purchase of its assets and hence the assessee was left with no reserve or own funds for making investment in the sister concern. Thus, it was argued that the borrowed funds had been utilized for the purpose of making investment in the sister concern and the disallowance of interest was rightly called for. The Tribunal, on appreciation of facts, recorded a finding that the assessee had sufficient funds of its own for making investment without using the interest bearing funds. Accordingly, the order of CIT(A) was upheld. When the matter came up before the Hon ble High Court, it was contended by the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot hold water, if a specific borrowing is made for making such an investment. When we turn to the facts of the instant case, we find that even though the shareholders fund is more than the investment in CWIP, but no detail of secured loan is available. In the absence of such specific information, it is difficult to decide the issue at our end. The impugned order is set aside to this extent and the AO is directed to decide this issue afresh in consonance with our foregoing observations. It is made clear that if there is some direct borrowing for investing in CWIP, then interest paid on such borrowing has to be disallowed. If, on the other hand, there is no specific borrowing, the financing of CWIP has to be treated as out of interest-free shareholders fund. In such a scenario, no disallowance of interest can be made as the interest-free shareholders fund would be higher than the amount of investment in CWIP. 31. The next ground is against the disallowance of ₹ 70,86,29,294 u/s 40(a)(ia) of the Act on account of `Roaming charges . 32. The facts apropos this ground are that the assessee incurred expenditure of ₹ 70,86,29,294/- on domestic roaming charges on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntervention was involved in the entire process of carriage of call from one operator to another. An elaborate discussion has been made in this regard by the Kolkata Bench of the Tribunal in Vodafone East Ltd. Vs. Addl. CIT (2015) 45 CCH 373 (Kol Trib.). After discussing the issue at length, the Tribunal eventually held that the payment of roaming charges did not require any deduction of tax at source either u/s 194C or 194I or 194J and, hence, no disallowance could be made u/s 40(a)(ia) of the Act. 34. At this stage, it is relevant to mention that after the judgment of the Hon ble Supreme Court in CIT vs. Bharti Cellular Ltd. (supra), there is some further development of law. In Bharti Cellular Ltd., the Hon ble Supreme Court remitted the matter to the AO for having expert opinion to ascertain if any human intervention was involved so as to consider the attractability or otherwise of the definition of technical services under section 9(1)(vii) of the Act. In a later decision in CIT vs. Kotak Securities Ltd. (2016) 383 ITR 1 (SC), the Hon ble Supreme Court, after considering its earlier decision in Bharti Cellular Ltd. (supra), observed that: modern day scientific and technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains a margin for its efforts and risks assumed. The assessee accounted for the revenue on the basis of consideration received from the distributors, that is, the price at which the pre-paid talk time was transferred to the distributor at a reduced price. For example, if MRP of pre-paid talk time is ₹ 100/- and the assessee sells the same to its distributor at ₹ 96/-, it accounted for the revenue of ₹ 96/-. The AO opined that the assessee should have accounted for ₹ 100/- as its revenue and the amount of ₹ 4/- as an item of expense under the head Commission to the distributors. It was further proposed that the said amount of commission was covered under the TDS provisions liable for deduction of tax at source u/s 194H of the Act. The assessee contended that there was no principalagent relationship with the distributors and, hence, there was no payment of any commission. The AO, after considering certain clauses of the Distributorship agreement, held that the relationship between the assessee and its distributors was of principal and agent and, hence, the provisions of section 194H were attracted. In reaching this conclusion, the AO relied on the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal level. When the matter came up before the Hon ble Karnataka High Court, their Lordships held that no relationship of principal and agent was found and it was a simple case of sale of right of service. The Hon ble High Court considered the relationship between the assessee in that case and its distributors as that of principal-to-principal and finally held that no deduction of tax at source was called for u/s 194H of the Act. While deciding the issue in favour of the assessee, the Hon ble Karnataka High Court also considered the judgment of the Hon ble Delhi High Court in Idea Cellular Ltd. (supra) and that of the Hon ble Kerala High Court in Vodafone Essaar Cellular Ltd. (supra). From these decisions, it is manifest that there is an apparent contradiction in the view taken by different High Courts. It is further an admitted position that the issue has yet to be finally settled by the Hon ble Summit Court. 38. It goes without saying that all the authorities working under the jurisdiction of a particular Hon ble High Court are bound by its decision, notwithstanding a contrary view available from other Hon ble High Courts. The assessee s corporate jurisdiction falls under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if tax at source is deductible u/s 194H and no such deduction etc. has been made, then, the commission payment would call for disallowance under section 40(a)(ia) of the Act. It is thus crystal clear that the concerned expense, so as to call for disallowance, must in the first instance be liable for deduction of tax at source under Chapter XVII-B of the Act. If a particular expenditure does not require deduction of tax at source, then no disallowance can be made. An expense will not be liable for deduction of tax at source, where either the AO himself considers it as not liable for tax deduction or where he considers it otherwise, but the appellate authorities overturn such a view of the AO. In a nutshell, where an expense in ultimate analysis is not liable for deduction of tax at source, the provisions of section 40(a)(ia) cannot be triggered/applied. 41. Coming back to the facts of the instant case, we find that although the AO held the applicability of section 194H, but the Hon ble Rajasthan High Court has reversed such a view to the extent of ₹ 48,14,87,078/- and nothing has been brought on record to demonstrate that the judgment of the Hon ble Rajasthan High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Form (CIF) and Customer Acquisition Form (CAF). Such amount was considered as hit by Explanation 1 to section 37(1) as in the opinion of the AO, it was an expenditure incurred for a purpose which is an offence or prohibited by law. No relief was allowed by the DRP which resulted into an addition of ₹ 63.83 lac by the AO in the impugned order. The assessee has assailed this addition before the Tribunal. 45. We have heard both the sides and perused the relevant material on record. The AO has correctly recorded that penalty of ₹ 63.83 lac was paid by the assessee on account of anomalies and irregularities in CIF and CAF. For giving a hue of penalty to such an amount as magnetized under Explanation 1 to section 37(1) of the Act, the AO referred to the provisions of section7(3) and section 20 of the Indian Telegraphs Act, 1885. We have gone through the relevant provisions of the Indian Telegraphs Act, 1885 and find that anomalies and irregularities in CIF and CAF are not covered under any of the specific provisions of the Indian Telegraphs Act. Rather, such penalties were imposed for non-compliance with the contractual obligations under the Licence agreement. As the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess referred to in sub-section (4), there shall be allowed a deduction of an amount equal to 100% of the profits and gains derived from such business for a certain period of years. Obviously, the assessee has fulfilled the conditions of sub-section (4) as the AO has allowed deduction u/s 80IA, albeit in part. Sub-section (2A) of section 80IA assumes significance in the context of an undertaking providing telecommunication services. This sub-section reads as under :- `Notwithstanding anything contained in sub-section (1) or subsection (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. (emphasis supplied by us) 49. It is pertinent to note that sub-section (2A) applies to an undertaking providing telecommunication services. The assessee is, admittedly, engaged in providing telecommunication services and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l institutions. The remaining amount of interest income having no link with the business of telecommunications, which is simply on parking of surplus funds in FDRs, will remain `Income from other sources and hence ineligible for deduction u/s 80IA. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such proceedings. 51. The next item is `Miscellaneous income of ₹ 4.09 crore. The assessee furnished details of Miscellaneous income before the DRP vide its objections. Such details have been incorporated on pages 153 and 154 of the appeal set file, which is a part of the objections before the DRP. The details indicate the nature of Miscellaneous income of ₹ 4.09 crore - Bounced cheque charges of ₹ 14 lac; Late payment charge of ₹ 2.18 crore; Bad debts written back of ₹ 98 lac; Scrap sale of ₹ 55 lac; Premium number sale of ₹ 16.32 lac; Cheque bounce charges ₹ 4.09 lac; Post paid plan revenue of ₹ 2.69 lac and two other small amounts of Customers refund written back and Insurance claim. From a detailed narration of the above charges recovered by the assessee given on pages 153 onwards, it becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequitur, revenue from IRU is also eligible for the deduction. 54. Ground no.8 of the assessee s appeal is against the addition of ₹ 2,00,75,850/- made by the AO u/s 68 of the Act. 55. Briefly stated, the facts of this ground are that the assessee showed unsecured loans in its audited balance sheet at ₹ 4,45,76,609/-. On being called upon to prove the genuineness of the loans, the assessee did not furnish any confirmation or any other documentary evidence to support the fresh cash credits received during the year. The AO noticed that in case of 816 parties, neither there were complete addresses nor even the PANs mentioned in the tax audit report. The assessee showed to have received ₹ 25,000/- each from 803 parties; ₹ 50,000/- each from 9 parties and ₹ 1 lac each from four parties. Total amount from these 816 parties came at ₹ 2.00 crore and odd. The AO treated the same as unexplained cash credit u/s 68 in the draft order. The assessee contended before the DRP that these 816 creditors were its `Distributors who deposited security through banking channel. The DRP accepted the assessee s contention and held that no addition should be made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m no. 3CEB including Payment of Royalty fee for use of trade name and mark amounting to ₹ 11,47,16,908/-. The AO made reference to the Transfer Pricing Officer (TPO) for determining the arm s length price (ALP) of the international transactions. The TPO noticed that the assessee paid royalty amounting to ₹ 7,64,77,939/- to Vodafone Ireland Marketing Ltd. for use of the brand name Vodafone and ₹ 3,82,38,969/- to M/s Rising Group Ltd. for use of brand name Essar . The TPO observed that the Agreements for payment of royalty with both the parties were made effective from 29.06.2007. Under these Agreements, both the companies allowed the assessee to use their respective trademarks, viz., Vodafone and Essar. Both the companies agreed not to charge any royalty till 31.05.2008. After 31.05.2008, the assessee was required to pay royalty @ 0.15% of net service revenue to Rising Group Ltd. for use of brand name Essar and @ 0.30% to Vodafone Ireland for use of brand name Vodafone. The assessee adopted a comparable instance of payment of royalty @ 7% of net sale of Forward Industries Inc., USA to Motorola Inc., USA, for trade mark licence for use of Motorola signature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overt that the TPO has determined Nil ALP of the international transaction of payment of royalty for use of the brand names on the reasoning that no benefit accrued to the assessee or the assessee did not pay any royalty for the use of brand in the past. 62. Simply because no royalty was paid in the past can be no reason to treat the ALP of royalty at Nil in later years. Chapter-X of the Act dealing with the transfer pricing provisions, contemplates making a comparison of the international transaction with the comparable uncontrolled transactions. If such a comparison demonstrates that the payment under the international transaction is at ALP in comparison with the other comparable uncontrolled transactions, then the transacted value of the international transaction has to be accepted. A comparison has to be made with comparable uncontrolled transactions and not with the assessee s past practice. So this reasoning of the TPO, as affirmed by the DRP, is not sustainable. 63. In so far as the use of the `Benefit test for determining the ALP of such services at Nil is concerned, it is noticed that the Hon ble Punjab Haryana High Court in Knorr-Bremse India P. Ltd. vs. ACIT (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er telephony and high definition television. As against this, the assessee is engaged in providing cellular mobile telephony services. There can be no comparison of a company dealing in hardware with a company providing telephony services. Pre-requisite for application of the CUP method is that there must be a complete identity between the international transaction and the uncontrolled transaction, with which comparison is sought to be made. When we examine the nature of the international transaction under consideration and the transaction between Forward Industries Inc., USA to Motorola Inc. USA, it is manifested that there is no comparison whatsoever between the two. That apart, it is a transaction between two foreign parties and hence cannot be considered for comparing an international transaction with the Indian assessee as a tested party. We, therefore, disapprove the comparable transaction used by the assessee for benchmarking the international transaction of payment of royalty for use of brands. 67. That apart, it is noticed that the action of the TPO in determining Nil ALP of the international transaction on the ground that no benefit accrued to the assessee and then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit accrued to the assessee etc. and the AO made the addition without examining the applicability of section 37(1) of the Act, we find the actions of the AO/TPO running in contradiction with the ratio laid down in Cushman Wakefield (supra). In these circumstances, we set aside the impugned order on this score and send the matter to the file of AO/TPO for deciding it in conformity with the above discussion and the law laid down by the Hon'ble jurisdictional High Court in the aforenoted case. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such proceedings. 69. Ground no.10 is against the addition of ₹ 284,68,27,994/- on account of transfer pricing adjustment of Advertising, Marketing and Promotion (AMP) expenses. 70. The facts apropos this ground, as recorded by the TPO on page 16 onwards of his order, are that the assessee incurred huge amount of AMP expenses which was for the promotion of brand owned by the AEs. Applying the bright line test, the TPO proposed transfer pricing adjustment amounting to ₹ 284,68,27,994/-. The DRP upheld the order passed by the TPO. The AO made the addition in the impugned order, against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) and others. He also relied on still another judgment dated 28.1.2016 of the Hon ble Delhi High Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. (for the AY 2010-11) in which the question as to whether AMP expenses is an international transaction, has been restored for a fresh determination. He still further referred to three later judgments of the Hon ble Delhi High Court, viz., Rayban Sun Optics India Ltd. VS. CIT (dt. 14.9.2016), Pr. CIT VS. Toshiba India Pvt. Ltd. (dt. 16.8.2016) and Pr. CIT VS. Bose Corporation (India) Pvt. Ltd. (dt. 23.8.2016) in all of which similar issue has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India Pvt. Ltd. (supra). The ld. DR argued that the Hon ble Delhi High Court in its earlier decision in Sony Ericson Mobile Communications (India) Pvt. Ltd. vs. CIT (2015) 374 ITR 118 (Del) has held AMP expenses to be an international transaction. It was argued the matter should be restored for a fresh determination. 73. We have heard the rival submissions and perused the relevant material on record. We fi ..... 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